2012 (8) TMI 317 - AT - Central Excise

Tribunal Allows CENVAT Credit Appeal, Clarifies Input Credit Rules

The tribunal allowed the appeal, holding that the denial of CENVAT credit to the appellant was unsustainable. The issue was settled in favor of the ... CENVAT credit of duty paid on inputs used for job work - Entitlement of job-worker to credit where principal manufacturer clears final product on payment of duty - Interpretation and applicability of Rule 6(1) of the CENVAT Credit Rules, 2004 - Precedential effect of larger Bench decision in Sterlite Industries (MODVAT/CENVAT credit not hit by Rule 57C)CENVAT credit of duty paid on inputs used for job work - Entitlement of job-worker to credit where principal manufacturer clears final product on payment of duty - Interpretation and applicability of Rule 6(1) of the CENVAT Credit Rules, 2004 - Precedential effect of larger Bench decision in Sterlite Industries (MODVAT/CENVAT credit not hit by Rule 57C) - Assessee entitled to CENVAT credit of duty paid on inputs used for job work where job-worked goods were cleared without payment of duty to the principal manufacturer who subsequently cleared the final product on payment of duty; denial of credit under Rule 6(1) CCR, 2004 is unsustainable on these facts. - HELD THAT: - The Tribunal held that the facts here are essentially the same as those before the larger Bench in Sterlite Industries, which decided that MODVAT credit on inputs used in manufacture of final product was not barred by Rule 57C of the erstwhile Central Excise Rules where the job-worked goods were cleared without payment of duty to a principal manufacturer who later cleared the final product on payment of duty. The equivalent provision in the present statute is Rule 6(1) of the CENVAT Credit Rules, 2004; the lower authorities invoked that provision to deny credit. Applying the ratio of the larger Bench, the Tribunal found the ratio squarely applicable and that the denial of CENVAT credit under Rule 6(1) on these facts could not be sustained. Reliance on subsequent decisions following the larger Bench was noted but the determinative principle is the Sterlite Industries larger Bench ruling which governs the instant case.Impugned order to the extent it denied the CENVAT credit is set aside and the appeal is allowed.Final Conclusion: The appeal is allowed: denial of CENVAT credit on inputs used for job work (where goods were cleared to the principal and final product cleared on payment of duty) is unsustainable in view of the larger Bench decision in Sterlite Industries; the order refusing the credit is set aside. Issues:1. Dispute regarding CENVAT credit availed on inputs used for job work.2. Eligibility of the appellant for CENVAT credit benefit.3. Interpretation of Rule 6 of CENVAT Credit Rules, 2004.Analysis:1. The dispute in the case revolved around the appellant availing CENVAT credit of Rs.2,81,900 on inputs used for job work, where the job-worked goods were cleared without payment of duty to the principal manufacturer. The show-cause notice alleged irregular availment of the credit, leading to the original authority confirming the demand based on the irregularity. The authority cited Rule 6 of CENVAT Credit Rules, 2004, stating that credit on inputs for job work purposes is not eligible. The Commissioner (Appeals) upheld this decision, emphasizing that only a manufacturer or producer of the final product could avail the credit, not the appellant who did not bring the final product into existence.2. The appellant argued that the issue was covered in their favor by a larger Bench decision in the case of Sterlite Industries (I) Ltd. vs. Commissioner and Sudhir Forging vs. Commissioner, where it was held that credit on inputs used in the manufacture of final products cleared without duty payment for further utilization in the manufacture of final products cleared on duty payment by the principal manufacturer was permissible. The appellant contended that the provisions cited by the lower authorities were similar to those in the larger Bench decision, thus making the decision applicable to their case.3. After considering the submissions, the tribunal found that the issue was settled in favor of the appellant by the larger Bench decision in Sterlite Industries, where it was clarified that the credit on inputs used in the manufacture of final products cleared without duty payment was permissible. The tribunal noted that the provisions invoked against the appellant were essentially similar to those addressed in the larger Bench decision, making the decision directly applicable to the present case. Consequently, the tribunal held that the denial of CENVAT credit to the appellant was unsustainable, and the appeal was allowed.